Promises, promises

The headlines all say that the General Assembly has reformed Illinois’ public employee pension system. The headlines lie. Legislators didn’t reform what has become an unworkable system, although they did change it – or try to. Their ingenious fix is likely to prove futile; the courts will have the last word, if not the wisest one.

Pensions have become a matter of considerable urgency – fiscal, personal and political – but the controversy has left me bemused. A culture in which people expect to be paid twice for doing a job – once while they’re working and again when they are not – is to me a strange and wondrous one. In the world I live in, the free market reigns, and pensions do not exist as a benefit or as an issue, but only as a dream.

I thus read with fascination the useful summary by the Associated Press of the effects of the deal. Under the present system a Department of Children and Family Services caseworker who retired after 25 years of service with a pension of $30,000 would have been getting $54,183 annually after 20 years of retirement; under the new plan the annual payout would be $46,122, which adds up to nearly $77,000 less over the 20 years. That’s a painful hit. But this caseworker is probably also getting Social Security. Add that to the state pension, and that ex-caseworker still will be pulling in very close to the 2012 median household income for the U.S. without working.

This is bad?

Michael Carrigan, president of the Illinois AFL-CIO, thinks so. He refers to such proposed reductions as “legal theft of lifetime savings.” His members (and here I should point out that many of my friends and family are present and former state employees) did not save this money. Yes, they paid their share – because it was taken out of their checks and they had no choice. Nor were the donations especially onerous. Members of the five state pension systems pay from 8 to 11.5 percent of their salaries into the pension system; self-employed people like me pay 12.4 percent of our gross income just in Social Security tax. Carrigan’s phrase is, as Rich Miller has noted, a persuadable bit of rhetoric, but like so much campaign rhetoric its intention is to mislead.

Most of the projected reductions in payouts come from paring the cost of living adjustment. The details are complex, but by cutting the COLA to less than inflation some years, the proposal shrinks the value of many pensions by nearly a third after 20-25 years in retirement.

I confess to having a bad attitude about COLAs. My wages, like those of millions of other Americans, have not been indexed for inflation at all, with the result that in real terms I earn about half what I earned 20 years ago. A guaranteed cost of living adjustment of any kind would be nice, but the present state COLA is better than nice. The present COLA is 3 percent every year, whatever the actual change in the cost of living. The actual annual inflation rates since 2003 are as follows: 1.9, 3.3, 3.4, 2.5, 4.1, 0.1, 2.7, 1.5, 3.0, 1.7 and 1.0, meaning that in seven of the eleven years, in short, state retirees did not only keep up with inflation, they outran it. Social Security recipients, whose COLA is determined by what goes on in the real world and not what goes on in union negotiating sessions, have seen their benefit adjusted upwards by these amounts in the same years: 1.4; 2.1; 2.7; 4.1; 3.3; 2.3; 5.8; 0.0; 0.0; 3.6; and 1.7, or 2.55 on average.

Don’t get me wrong. Of course it is unfair that retirees should take the hit for dumb and cowardly pols who mismanaged the system. But how is that different from the private sector workers who take worse hits because the CEO they work for mismanaged their company? Sure it’s wrong for the state to not keep its promises, but why should promises to its workers be privileged – as the 1970 Constitution privileges them – over the constitution’s promises to provide good schools to all or a “a healthful environment”? If the state is giving a raw deal to its retired workers, its giving a rawer deal to kids who have trouble reading, to drug addicts trying to kick, to old people at home who can’t feed themselves. I’d like to see the state do better by all of them, just as I’d like to see big companies and bankers and idle rich do better by Illinois.

What I’d like to see doesn’t matter, but what the state high court justices like to see does. They will settle the issue, probably by sustaining the bad judgment of the 1970 constitution-makers – thus offending justice no matter which way they rule.